The number of people entering false details on their mortgage application forms has been on the increase, according to new data from the Council of Mortgage Lenders (CML).
The problem has been exacerbated by a rush of buyers hoping to take advantage of recent house price falls to get on to or trade up the property ladder. The increased demand for mortgages, at a time when funding remains in short supply, has left lenders increasingly favouring borrowers with large deposits or high credit scores. But an increasing number of borrowers have also been falsifying their income.
Sarah Robson, a spokeswoman for the CML, said: ‘We don’t keep figures on mortgage fraud but from anecdotal evidence we do know that it has increased.
‘That is to be expected as lenders’ criteria has tightened and would-be borrowers who are cut out are trying to circumnavigate this.
‘But lenders are vigilant to it, so they are picking it up.’
Mortgage fraud linked to tighter lending criteria
One of the ways in which lenders have tightened their criteria is by reducing the proportion of a borrower’s income that they are prepared to advance.
The latest figures from the CML show that the average loan to income multiple for first-time buyers had fallen to 2.97 in May, down from a high of 3.39 in July and August 2007, before the credit crunch hit the mainstream mortgage market.
Another practice lenders are reporting is that applicants are not disclosing all of their existing credit card or loan debts, for fear that this may make the mortgage for which they are applying look less affordable.
But lenders are often picking up on these discrepancies by checking borrowers’ credit files.
Which? mortgage expert Cathy Neal says: ‘It might be tempting to bend the truth if you are applying for a mortgage in the current market but it’s unwise to overstretch yourself.
‘You could find that if you are not honest with the lender, you could end up with a mortgage you can’t afford to pay for. It’s wiser to wait until you’ve saved up a bigger deposit so you have access to the best deals.’
Tighter criteria hit cash-strapped borrowers
The problem of tight lending criteria is particularly acute for borrowers with only small deposits.
There are currently only 121 mortgages available for people with a 10% deposit, down from 1,152 in November 2007.
The CML’s Sarah Robson continued: ‘Demand for these (90% LTV) products is high, and those with the best credit score are going to be at the front of the queue.’
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